After opening Tuesday’s trading session higher, stocks nosedived midday and ended the day lower after reports surfaced that House Democrats were looking into impeaching President Trump.
House Speaker Nancy Pelosi announced a formal impeachment inquiry of the president after market close Tuesday. Trump has been entangled in a web of drama surrounding his phone call with the president of Ukraine in July. Trump confirmed that he asked the Ukrainian president to dig up dirt on former U.S. Vice President and Democratic presidential candidate Joe Biden and his son Hunter Biden.
Many are now wondering if the possible impeachment of Trump will inject further uncertainty into markets, sending them into a tailspin.
There have been two instances in U.S. history in which sitting presidents have been impeached: Andrew Johnson, in 1868, and Bill Clinton, in 1998. Though some analysts are saying that the market reaction following a Trump impeachment could mirror that of Clinton’s, during which markets surged, Neil Dutta, head of U.S. economics at Renaissance Macro Research, argues that fundamentals usually outweigh political events such as impeachment.
Each time is different, according to Dutta.“For equities, remember we’ve seen something like this twice and had two very different results. During the Nixon saga, stocks were already tumbling (of course, we were going into recession) and kept falling after the formal inquiry process started. During the Clinton impeachment process, markets exploded to the upside as the economy boomed,” Dutta said.
Meanwhile, on the economic data front, the U.S. housing market will take centerstage Wednesday morning when the Census Bureau releases August’s new home sales data.
New home sales come on the heels of data released Tuesday that showed that U.S. home price growth remained unchanged in July.
Economists are predicting that new home sales likely rebounded in August to a seasonally adjusted 656,00 units, up from 635,000 units in July.
“New home sales declined 12.8% in July. We expect a rebound in August and forecast new home sales to rise by 6.1% to a rate of 674,000 units,” Morgan Stanley wrote in a note Friday. “Given the soft print in August last year, our new forecast would bring sales up by about 11.5% on a year-over-year basis.”
Nomura echoed Morgan Stanley’s prediction. “New home sales likely rebounded 3.9% m-o-m to 660k in August after a sharp 12.8% m-o-m decline in July,” the firm wrote in a note Friday. “The [National Association of Home Builders’] index for sales of single family homes improved 2pp to 73 in August, the highest reading since October 2018. The improvement in this report seems to have been driven by increased buying interests as long-term interest rates continued to trend lower. While consumers still remain wary of high home prices, we expect lower interest rates to have boosted sales in August.”
No major corporate earnings announcements are scheduled for Wednesday.
Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.
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